Why investing in a Trump Account could complicate your taxes

[Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.]

Parents considering the new “Trump Accounts” for their children could be in for an unexpected tax hassle. Several tax experts warn that any personal contributions to these accounts may require filing IRS Form 709, a little-used and highly complex gift tax return that can only be submitted by mail and often takes hours to complete.

The issue stems from how the accounts were written into the recent Republican tax and spending law. While the federal government will automatically deposit $1,000 into accounts for children born between 2025 and 2028, any money added by parents, relatives, employers, or charities is treated as a taxable gift. Because children cannot access the funds until age 18, those contributions do not qualify for the usual gift tax exemptions, even if the amount is small.

Tax professionals say Congress likely overlooked this detail and are urging lawmakers to fix it, similar to how 529 college savings plans were later exempted from the same requirement. Without a change, families who contribute their own money could face significant compliance burdens or problems during an audit if they fail to file the form.

Experts advise parents to accept the government’s free $1,000 and any charitable contributions, but to think carefully before adding personal funds. Many say traditional options like 529 plans or even regular brokerage accounts offer better tax benefits and fewer complications, making Trump Accounts a less attractive choice for most families.

For more information see Julie Zauzmer Weil “Why investing in a Trump Account could complicate your taxes,” The Washington Post, December 21, 2025.